Bahin v Hughes
A passive trustee who leaves the management of the trust to a co-trustee is equally liable for a breach of trust, and has no right to an indemnity from the active trustee.
Facts
Three trustees held a legacy on trust. One of them, Miss Hughes, invested the money in an unauthorised mortgage of leasehold property, which proved insufficient. The other trustees, Mrs Edwards and her husband, had taken no part in managing the trust, leaving it to Miss Hughes. When the beneficiaries sued for the loss, Mr Edwards claimed an indemnity from Miss Hughes's estate.
Legal principle
The Court of Appeal held that all the trustees were jointly liable, and that Mr Edwards was not entitled to an indemnity. Cotton LJ said that a trustee who allows his co-trustee to manage the trust, and who takes no part himself, is not excused, because he is in breach of his own duty to supervise. An indemnity would be available only if the active trustee was a solicitor who had exercised a controlling influence, or had obtained the benefit of the breach, which was not the case here. Miss Hughes had acted honestly, without any benefit to herself. Contribution between trustees is now governed by the Civil Liability (Contribution) Act 1978.
Related cases on breach of trust and defences
- AIB Group (UK) plc v Mark Redler & Co [2014] UKSC 58, [2015] AC 1503
- Armitage v Nurse [1998] Ch 241
- Re Dawson (deceased) [1966] 2 NSWR 211
- Re Diplock [1948] Ch 465
- Re Evans (deceased) [1999] 2 All ER 777
- Fletcher v Collis [1905] 2 Ch 24
- Head v Gould [1898] 2 Ch 250
- Ministry of Health v Simpson [1951] AC 251
Studying equity and trusts? Our tutors help you understand and apply cases like this in essays, problem questions and exams. Request a quote or browse our law notes.
This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
